The Value of Money
According to a
AAA study in 2018, the average cost to own and operate a new vehicle was $8,849 a year. That’s $737 a month.
Considering the Census Bureau reports a median household income of $61,372 and most households have two cars, that’s 28 percent of your income going toward the cost of car ownership.
You could buy a decent used vehicle to cut down on the cost of ownership. Even though a used car could potentially lower your average monthly costs, you’d have to allocate more money to cover irregular expenses like maintenance and repair bills.
But whether you’re driving a new or used car, let’s break down the monetary cost of commuting to see what it’s costing you.
Let’s say your drive is 19 miles one-way. The IRS standard mileage rate for 2019 to account for the cost of gas and wear and tear on your vehicle is 58 cents per mile. That means your commute to work costs you $11.02.
If you multiply that by two to cover your drive there and back, you’ll find it takes $22.04 a day, or $110.20 every week, to commute back and forth to work.
But that’s just for one car, and most households have two people driving separate cars to work. When you calculate $110.20 a week for two vehicles, that’s
$114,608 you spend on commuting over 10 years.
That’s a lot of money.
What if you saved that money instead? If you put that money into an investment account each week and let it grow over the same 10-year period with a reasonable return rate of 4%, you’d have $140,924 in your account.
Not only would you save the $114,608 that you’d otherwise spend on commuting, but you’d also earn more than $26,000 in interest.
The Value of Time
You already know your time is valuable, but not all uses of time are equal. If you spend more time doing profitable work, you’ll make more money.
Spending time with others builds better relationships. Using your time to create a flexible career will give you more freedom.
Whether you want more money, better relationships or more freedom, it all depends on how you spend your time.
This is known as opportunity cost. It compares how you are spending your time to how you could be spending your time.
For instance, if you spend time commuting, you can’t spend that time to invest in better relationships or use it to do more profitable work.
Since you’re spending time driving back and forth to work, let’s see what your commute is costing you.
Figuring out how much your time is worth is more than whatever wage you’d earn if you spent that hour working. You’ll need to add up the total amount of time you invest to earn money, not just the time you’re physically at work.
Let’s go back to your 19-mile commute. Now let’s say you live in a regular neighborhood but encounter high-traffic areas that slow down your drive, so your commute takes about 40 minutes one way.
In this example, you spend eight hours working and an hour and 20 minutes driving. That means it costs you nine hours and 20 minutes to earn money that day.
When you add it up over a five-day work week, your commute will take up an extra 6.5 hours of your week. That’s almost a full day’s work added to your already busy schedule, and that’s time that you could have spent on something more meaningful in your life.
If you work a five-day work week, you’re spending 346 hours throughout a year, the equivalent of 14.5 days, commuting. What could you do with an extra two weeks’ time every year?
If we look at the time you spend in monetary terms, let’s see how much cash it costs to commute. Determining the worth of an hour of your time is easily done by comparing it to your hourly wage.
As previously mentioned, the median household income in 2017 was $61,372. Using that average, the typical U.S. worker makes $29.50 per hour. So, those 346 hours you spend commuting would cost you $10,207 every year.
Since most households have two people that drive to work every day, you’re losing $20,414 in cash every year by driving to work.
If you’re spending $11,460 in actual costs and the equivalent of $20,414 in lost time, the real cost of your commute is $31,875 a year for your household.
